Notre Dame, other nonprofits see property tax bills

County scrutinizes exemption requests

County scrutinizes exemption requests

December 21, 2009|By MARGARET FOSMOE Tribune Staff Writer

This story was originally posted at 8:47 a.m. Dec. 21, 2009.

SOUTH BEND -- When property tax bills arrived in the mail this fall, the University of Notre Dame received a tax bill for the first time for some on-campus facilities. The university will be paying a total of $28,300 in property taxes on the Hammes Notre Dame Bookstore, the Morris Inn, Legends restaurant and the nine-hole Burke Golf Course. That's part of a $230,000 total tax bill Notre Dame owes St. Joseph County this year. The university voluntarily has paid property taxes for years on most off-campus buildings and lots it owns, as well as the 18-hole Warren Golf Course. With budgets tight and tax support reduced because of Indiana's property tax caps, county officials are taking a closer look at facilities that traditionally had been considered tax exempt. Portions of those buildings that are considered profit-making -- rather than charitable or educational -- are now considered taxable. "We're asking some tough questions to a lot of our exemption applicants," county Assessor David Wesolowski said. Even with the addition of the four on-campus properties, Notre Dame's tax bill went down this year because of reassessments and Indiana's property tax reform. In 2008, the university paid about $290,000 in property taxes. The bill for on-campus properties came as no surprise to Notre Dame administrators, who had been discussing the matter with the county assessor's office for more than a year. "We filed for the exemptions, and they came back and spoke to us about several of the (requested) exemptions," said John Affleck-Graves, Notre Dame's executive vice president. "They asked us for some details on some of the properties," Affleck-Graves said. "We were very comfortable with the process. It was very fair and open." The university went through a process of documenting what percentage of each campus building is used for educational, religious or other exempt purposes. County officials determined that the four on-campus facilities that draw significant business from the public should pay some property taxes, and university leaders agreed. "We want to be a good partner in the community," Affleck-Graves said. As revenue has grown from outside sources at those on-campus facilities, it's appropriate that Notre Dame pay property taxes on them, he said. Other groups hit, too Notre Dame isn't the only local nonprofit paying property taxes this year on buildings that previously had been considered exempt. Memorial Health System, the parent company of Memorial Hospital, this fall received a tax bill for its Centennial medical office building. The building, which houses hospital operations and private physician practices, previously had been exempt. Hospital officials agree it's appropriate that the Centennial building be assessed some property taxes, said Jeff Costello, vice president and chief financial officer for Memorial Health System. This year's tax bill for that building states $2.679 million in taxes are owed, but that's because of a computation error, Costello said. "They clearly miscalculated it," he said. When the error is corrected, he expects the tax bill for the building to be less than $550,000. The Mishawaka Fraternal Order of Police hall, 1825 E. 12th St. -- previously exempt -- received a tax bill of $11,114. The FOP runs bingo games and rents out its hall for wedding receptions and banquets. "It's a big issue," said Jessica Guannuzzi, business manager for the FOP. The nonprofit organization is borrowing money to pay the tax but also plans to appeal the bill, she said. The lodge received a similar tax bill last year. "We appealed it last year and won," she said. Other nonprofits may find themselves in a similar situation. "We're looking at Saint Joseph (Regional Medical Center)'s exemption applications," Wesolowski said. What the law says Under Indiana law, nonprofit and charitable organizations traditionally have been largely exempt from property taxes. "All or part of a building is exempt from property taxation if it is owned, occupied and used by a person for educational, literary, scientific, religious, or charitable purposes," the law states. A tract of land, including the campus and athletic grounds of an educational institution, is exempt from property taxes if it meets certain requirements and is not used by the nonprofit entity to make a profit, the law states. Nonprofits must file tax-exemption requests every two years. To qualify for full exemption, a nonprofit entity must show that the entire building is used for religious, educational or some other exempt purpose, Wesolowski said. If only part of the building is used for exempt purposes, the owner must pay property taxes on the rest, he said. In the case of Notre Dame's campus bookstore, for example, "it's competing with other businesses," the assessor said. He said the negotiations with the university regarding the on-campus buildings were cordial. "There was a mutual working relationship, because Notre Dame wanted to be a fair and responsible player in our community," he said. The county's new requirement that Notre Dame pay some property taxes on campus facilities is unrelated to the university's announcement in June that it will make voluntary contributions totaling $5.5 million over the next decade to the cities of South Bend and Mishawaka, St. Joseph County and the town of Roseland, Affleck-Graves said. The voluntary contributions are in addition to the university's property taxes. Setting a trend? Michael Hicks, director of the Center for Business & Economic Research at Ball State University, said he doesn't know whether other Indiana counties are taxing nonprofit-owned properties that previously were exempt. He hasn't heard of it happening elsewhere. But once a nonprofit organization agrees to such an approach, it shouldn't be surprised if the tax bills grow in the future, he said. "What if the county in the future decides to tax (Notre Dame Stadium)?" Hicks said, pointing out that the university charges fans to attend games there. Once university officials agree to pay property taxes on some on-campus facilities, they may eventually face property taxes on more, he said. The county's tax appeals process or the courts, Hicks said, likely will decide where the line is drawn. Staff writer Margaret Fosmoe: mfosmoe@sbtinfo.com (574) 235-6329